Uber rival Lyft cuts fares, plans to add 100 new cities

Lyft, the No 2 US ride-hailing company, plans to boost the number of cities it covers to 300 from 200 by the end of 2017 while cutting prices to attract more customers.
Lyft, the No 2 US ride-hailing company, plans to boost the number of cities it covers to 300 from 200 by the end of 2017 while cutting prices to attract more customers.PHOTO: FACEBOOK/LYFT

SAN FRANCISCO (BLOOMBERG) - Lyft, the No 2 US ride-hailing company, plans to boost the number of cities it covers to 300 from 200 by the end of 2017 while cutting prices to attract more customers.

Neither Lyft or top rival Uber Technologies are making money in the US as they compete for driver-and-rider loyalty.

Uber covers more than 75 per cent of the US. Lyft says that its network reaches 55 per cent of the population, and that will rise to about 72 per cent after the expansion, which begins this week with the addition of 40 cities.

Additionally - in what has become an annual bloodletting for ride-hailing companies - Lyft cut fares by about 1 per cent nationally, a spokesman said on Wednesday (Jan 25). At the same time, Uber has no plans to do widespread cuts.

Fare cuts usually indicate savings for riders at the cost of driver pay and profit margins. Lyft has traditionally blamed Uber for pushing down prices and squeezing drivers with lower and lower fares.

"Most of our drivers understand that if we're not competitive on price we won't have any passengers for them," Jaime Raczka, head of early stage markets at Lyft, said in an interview.

Lyft continues to offer the ability to tip drivers within its application, giving them a way to earn extra income, a feature Uber has refused to provide. They have earned more than US$150 million in tips, according to Lyft. But Uber has generally been able to offer more consistent trips, which helps retention. Many full-time drivers, some of whom sleep in their cars, drive for Uber.

Lyft drivers are bristling at the price cuts.

"Wow, usually lyft follows uber. Did I miss an Uber rate cut?" one driver posted on an online forum. Another wrote: "Lyft should raise rates and try to differentiate themselves from Uber. Instead they're UberLite in pink. Tips are nice but aren't that major."

While the ride-hailing companies typically take a commission of 20 to 30 per cent, that's not an exact proxy for how much a driver gets paid. Uber and Lyft have turned to promotions, such as weekly incentives to achieve a certain number of trips, to bolster driver pay.